IN THE CIRCUIT COURT OF THE SIXTH JUDICIAL CIRCUIT IN AND FOR PASCO COUNTY, FLORIDA CIVIL DIVISION CASE

NO. 51-2008-CA-10287-WS

DEUTSCHE BANK NATIONAL TRUST COMPANY AS TRUSTEE FOR THE MLMI TRUST SERIES 2007-MLN1, Plaintiff, vs RAYMOND E. DAGE; JACQUELINE G. DAGE, et al., Defendants. ________________________________/

BEFORE: DATE: TIME: PLACE:

THE HONORABLE WALTER SCHAFER, JR. May 11, 2011 Commencing at 1:30 p.m. West Pasco Judicial Center 7530 Little Road New Port Richey, Florida

BEFORE:

SHARON K. RUBY Stenographic Court Reporter and Notary Public - State of Florida at Large

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APPEARANCES

TANYA SIMPSON, ESQUIRE Smith, Hiatt & Diaz, P.A. 2691 E. Oakland Park Boulevard #303 Fort Lauderdale, Florida 33301

Attorney for Plaintiff

DANIEL P. ROCK, ESQUIRE Daniel Rock, P.A. 5426 Crafts Street New Port Richey, Florida 34652-3963

Attorney for Defendants

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ahead. MS. SIMPSON: Yes, sir. I'm going to start -This is just order. MS. SIMPSON: THE COURT: And a bunch of other things. I've got a few things here so go right P R O C E E D I N G S THE COURT: We're here on file No.

51-2008-CA-10287-WS, Deutsche Bank versus Raymond Dage, D-a-g-e. Did I pronounce that correctly? MR. ROCK: THE COURT: You did. We have Mr. Rock here. And your name

for the record, please. MS. SIMPSON: THE COURT: MS. SIMPSON: THE COURT: MR. ROCK: THE COURT: Tanya Simpson for the Plaintiff. Okay. That's T-a-n-y-a, S-i-m-p-s-o-n. Okay. Mr. Rock, this is --

Actually this is their motion. It's their motion for protective

I've given a copy of this to opposing counsel.

for reference so that when I reference the cases -THE COURT: appreciate that. MS. SIMPSON: THE COURT: MS. SIMPSON: -- I can have you take a look at it. Thank you. I know we reserved a whole bunch of Thank you very much. I always

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time. We've talked a little bit beforehand. I don't think I do

it's going to take quite as much time as we thought.

want to take a few minutes here just to sort of lay out where we are in terms of the facts of the case, and then I'm going to go straight to the law that I think is dispositive of all of this and work backwards from there if we need to, but I think that we can save some of the Court's time if we just go straight to the crux of the matter. So I'll just start by stating that procedurally in this case judgment has already been entered. Prior to The

judgment being entered the Defendants were defaulted. default was entered back in January of 2009. entered back in June of 2009.

Judgment was

We're now here addressing --

one of the items that I moved to strike is the Defendant's motion to vacate the summary final judgment, and that motion was filed back in February of 2011. So that was outside the

year after the judgment was entered and a little bit over two years after they were defaulted. A hearing was already had on that motion and that hearing was continued for the purposes of having an evidentiary hearing. Once that order was entered we

received a notice of production to ask us to produce documents for the evidentiary hearing. After having

reviewed both of those I filed the motion that you have before you. I actually filed an original motion, but the

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one. THE COURT: MS. SIMPSON: 26 through 46. Is 26 where we're starting? Yes. And for the record I have tabs amended motion that you have before you is the Plaintiff's motion for protective order -THE COURT: MS. SIMPSON: What tab? I'm sorry. No. Tab 26, the first

This is just because I didn't have any 1 So we start with 26. That's fine. Thank you.

through 25's in the office. THE COURT: MS. SIMPSON: Okay.

So Tab No. 26 is my motion, and I'll

just read into the record it's Plaintiff's amended motion for protective order as to discovery, motion to strike, notice of production of documents, post-judgment answer and affirmative defenses and notice of hearing and memorandum of law in opposition to Defendant's emergency motion to vacate foreclosure judgment for fraud. If you turn to Tab No. 29, that's Defendant's emergency motion to vacate foreclosure judgment. And

reading through this motion, and opposing counsel will have a chance to state his position on this, but I think we both agree that he's moving under Florida Statute 702.07 to vacate the Florida judgment and is specifically not moving under Florida Rule of Civil Procedure 1.540(b) and that distinction is what brings us to the table today.

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I want to turn to Tab No. 35. I want to just read

Florida Statute 702.07 so we'll know what we're talking about here. 1927. This is a statute that was enacted back in

It's entitled power of courts and judges to set aside

foreclosure decrees at any time before the sale, and we are presently before the sale. counsel is invoking. The circuit courts of this state -- I'm reading the statute now -- and the judges thereof at chambers shall have jurisdiction, power and authority to rescind, vacate and set aside a decree of foreclosure of a mortgage of property at any time before the sale thereof has been actually made pursuant to the terms of such decree and to dismiss the foreclosure proceeding upon the payment of all court costs. The Defendant is specifically relying on this statute and is not relying on Rule 1.540(b). I want to turn This is the statute that defense

back to Tab No. 34, which is Florida Rule of Civil Procedure 1.540, and the relevant portion of this rule -- and then I'll be comparing this rule against the statute and arguing how they can be read together. The relevant portion of this

rule under Florida Rule of Civil Procedure 1.540(b), on motion and upon such terms as are just the court may relieve a party or party's legal representative from a final decree, order or proceeding for the following reasons, and one of

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the reasons stated is fraud. After that -- after the list

of reasons it says the motion shall be filed not more than one year after the judgment. So we have here -- and what defense counsel seems to be pointing out is apparently a conflict between the statute and the Rule of Civil Procedure, where the statute says at any time before the sale, but the Rule of Civil Procedure says not more than one year before a judgment. And so the dilemma that's before the Court today is how to read that statute and that rule such that one is not in conflict with the other and such that neither violates the Florida Constitution. I'm going to walk you through a case. Tab No. 42. It's under

It's a Florida Supreme Court case, Parker

versus Parker -- it was heard by the Florida Supreme Court on February 1st of 2007. That's at 950 So.2d, Page 389 --

that really has pretty well sliced and diced how the statute works, how the rule works when one is to be applied and when the other one is to be applied. And I think the Supreme

Court has already done the heavy lifting that will lead to a decision of how this all will work out. And the reason that I'm going to this issue first rather than talking about the notice of production and the evidentiary hearing and such is that if we determine that -or if Your Honor determines that the Supreme Court has

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already decided whether or not this motion is time barred or is not time barred based on Rule 1.540(b), Defendant's motion is time barred or is not time barred, if Your Honor determines that that motion is time barred then there will be no evidentiary hearing. If there is no evidentiary hearing, then no discovery would be relevant because discovery would only be relevant if it either came up with evidence that could be admitted or anything that could lead to admissible evidence. And if there is no hearing, there is no evidentiary hearing, then there is no additional evidence to be admitted, so the discovery wouldn't be relevant either. So once we take care of this issue that should be dispositive of all the others. through Parker. And I want to just walk

I want to walk through a whole lot of this

case because I really think the Supreme Court has done a good job at laying this out. I'm going to start with if you

look at the bottom right-hand corner here -- actually hang on just a second. Page four of the -- page four. It's

actually 392 of the case but page four in what you have in your binder. I'm going to read from the very first

paragraph here, and then I'm going to backtrack a little bit as to how we got here. This paragraph reads that where fraud is extrinsic it is deemed independent of the action and therefore must be

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back here. attacked independent of the action. However, where fraud is

intrinsic it is deemed to have occurred in the current action and must be attached by a Rule 1.540(b) motion directed at the current action, and because Rule 1.540(b) seeks to achieve finality the motion must be filed within one year of the final judgment. So the question before the Court today is whether or not we're talking about extrinsic fraud or intrinsic fraud, and this case walks you right through what that is and how that applies and when a motion must be brought under 1.540(b) or when it can be brought some other way. want to go back to the beginning of Parker. So I

Actually it's

going to be page two in your binder under Roman Numeral II, discussion. The factual scenario in Parker -- let me just go The factual scenario in Parker is that this is a

divorce case in which the wife had allegedly misled the Court as to the paternity of the father and was therefore awarded -- the paternity of the child and was therefore awarded child support. Later on the father came back and

said I just did a DNA test and I'm not the dad, I don't have to pay this. And here is how the court determined this issue. Under Roman Numeral II, the conflict in issue is whether the wife's representation of paternity in dissolution of

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marriage -- now, again, we're not in a dissolution of marriage case but the conflict is whether this misrepresentation is extrinsic or intrinsic fraud. This

distinction is important because of the one year limitation for filing a motion for relief from judgment under Florida Rule of Civil Procedure 1.540(b), and the court goes on to dissect what extrinsic fraud is and what intrinsic fraud is and when it's to be applied and how that determines whether the motion must be brought under 1.540(b) or whether the relief can be sought some other way. If you go on the right side of page two, the third full paragraph, under Rule 1.540(b) relief from a judgment based on intrinsic fraud must be sought by motion within one year of its entry. However, this one year time limit does

not apply to extrinsic fraud because extrinsic fraud is considered fraud on the court. Defense counsel's motion has

been brought as fraud on the court or extrinsic fraud. That's what he purports his motion to be under. We continue. Rule 1.540(b) specifically provides

that this rule does not limit the power of a court to entertain an independent action to relieve a party from a judgment, decree, order or proceeding to set aside a judgment or decree for fraud upon the court, which is extrinsic fraud. Rule 1.540(b) clearly preserves the

equitable remedy of independent action where extrinsic fraud

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is established. Now I want to turn over to the next page. I'm

going to read a lot of this, but the Supreme Court really brings it well together and I'm not going to try to outdo them. I'm just going to let them speak for themselves. The

next page, page three, on the top -- the beginning of the first full paragraph. Extrinsic fraud involves conduct This

which is collateral to the issues tried in the case.

court, that means the Supreme Court, has defined extrinsic fraud as the prevention of an unsuccessful party from presenting his case. If you skip down to the next paragraph, the last part of that next paragraph, in other words extrinsic fraud occurs where a defendant has somehow been prevented from participating in a cause. Intrinsic fraud on the other hand

applies to fraudulent conduct that arises within a proceeding and pertains to the issues in the case that have been tried or could have been tried. Skip to the next paragraph. If a judgment was

obtained upon false testimony or fraudulent instrument -and those two things are going to be key. to that. We'll come back

If judgment was obtained upon false testimony or

fraudulent instrument and the parties were heard, the evidence submitted to and received consideration by the court, then it may be said that the matter has been actually

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italics. tried or was so in issue that it might have been tried. Skip down to the very bottom of that page still on the left side. Extrinsic fraud is conduct which prevents a

party from trying an issue before the cart, and the prevention itself becomes a collateral issue to the cause. Whereas intrinsic fraud is the presentation of misleading information on an issue before the court that was tried or could have been tried. Skip down a couple more paragraphs right after the This is where we're getting into the distinction Prior to the adoption of

between the rule and the statute.

Florida Rule of Civil Procedure 1.540(b) -- and I'm going to stop right there. Prior to the adoption. What existed The

prior to the adoption of the rule? statute came about in 1927.

The statute.

The statute 720.07 was in So prior

existence prior to the adoption of Rule 1.540(b).

to the adoption of that rule only what was defined as extrinsic fraud could in reality form the basis for relief from a judgment. Further such relief could be obtained only by an independent action in equity. There was no practical basis

for relief from a judgment obtained by intrinsic fraud. That independent action is what is allowed under 702.07. That's what was in existence prior to 1.540(b). The Supreme Court said prior to that rule the only

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left off. rule. way to get a relief based on fraud on the court, which is extrinsic fraud, is to go under things that existed prior to the enactment of the rule. enactment of the rule? What existed prior to the You could only do that

702.07.

under extrinsic fraud and you could only do that in a separate action. Now we have a rule, and I want to go back to the The rule is -- keep your finger here, but the rule is Rule 1.540(b)(3) now allows an action for

Tab No. 34.

fraud, whether intrinsic or extrinsic, to be brought by motion in the case. So now you have two different ways to You can bring it under the rule or

bring extrinsic fraud.

you can bring it outside of the rule in a separate action under the statute, but there is only one way to bring intrinsic fraud and that's under the rule. I'm going to go back to the case where we just I'm going to reread that last little bit that I Prior to the adoption of Florida Rule

did and then go on.

of Civil Procedure 1.540(b), that's when the statute existed by itself without the rule, only what was defined as extrinsic fraud could in reality form the basis for relief from a judgment. Further such relief could -- I'm sorry,

further such relief could be obtained only by an independent action in equity. There was no practical basis for relief

from a judgment obtained by intrinsic fraud.

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Skip down to the last paragraph on this page. should clearly be understood that Rule 1.540(b) broadened the grounds upon which a final judgment could be attacked. How did it broaden it? It added intrinsic as a ground but It

created a one year limitation period within which such an attack must be made. The rule does not change the existing

definition of intrinsic and extrinsic fraud or change the type of conduct which constitutes fraud on the court. And then we get back to where we started, and this is the holding in this part of the case. Thus, where fraud

is extrinsic it is deemed independent of the action and, therefore, must be attacked independent of the action. Now,

again, the rule allows it to be brought under 1.540(b) in the same case, but it's an independent type of a motion. It's not based on things that happen intrinsically. It can

be brought under 1.540(b) or it can be brought under the statute. In reading on, however, where fraud is intrinsic it is deemed to have occurred in the current action and must be attacked by a Rule 1.540(b) motion. In other words, It must

intrinsic fraud may not be attacked any other way.

be attacked by a 1.540(b) motion directed at the current action, and because Rule 1.540(b) seeks to achieve finality the motion must be filed within one year of the final judgment. So that is the law.

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law. fraud? Now we need to apply the facts of the case to the Is the motion alleging extrinsic fraud or intrinsic For that we're going to look at the motion itself. Yes, Tab No. 29 is

That's under Tab 29, I believe. Defendant's motion.

And I'm going to ask you -- it might be

too late now, but I'm going to ask you to keep a finger on page three under Tab 42 because we're going to flip back and forth for a minute. Defendant's motion -- and this motion is not set today except to the extent that I'm moving to strike it. we do need to look at it so we can talk about what we're moving to strike. The first eighteen of the twenty-one So

pages of the Defendant's motion go to issues of standing and whether or not an allegedly erroneous or false or fraudulent assignment of mortgage means that Plaintiff's standing in the case was fraud on the court. Pages nineteen to twenty of the Defendant's motion go to the affidavit of indebtedness that Plaintiff filed in the case when it was seeking summary judgment, whether there were mathematical errors, whether there were payments that were somehow not included in the affidavit. things. So we have two

We have an instrument, the assignment of mortgage,

and we have testimony, the affidavit of indebtedness. We're going to turn back to page three of the Parker case, on the left side on the bottom, the third to

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last paragraph. If a judgment was obtained upon false

testimony, that's the affidavit, if it were false, or a fraudulent instrument, that's the assignment of mortgage, if it were false, and the parties were heard, there is no allegation that the parties were not noticed for the summary judgment hearing, then the evidence submitted and received -- and the evidence submitted and received by consideration of the court was the affidavit and assignment of mortgage submitted and received and considered by the court -- yes -- if all those things are true, then it may be said that the matter has been actually tried or was so in issue that it might have been tried. In other words, that

makes it intrinsic fraud that's being alleged, not extrinsic fraud. And while he's titled his motion fraud on the court, which is another definition, another word, another term for the same thing, extrinsic fraud, while he's entitled it that, he has pled the elements of intrinsic fraud, and intrinsic fraud may not be brought more than one year after the action and may not be brought under anything other than 1.540(b). The elements of extrinsic fraud, flipping back to that page three, extrinsic fraud occurs where a defendant has somehow been prevented from participating in a cause. Nowhere is that alleged in the motion. So this entire

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motion to vacate is time barred by the passage of time under Rule 1.540(b). Because the motion is time barred, no Because no hearing is appropriate, Because no evidence will be

hearing is appropriate.

no evidence will be presented.

presented, no additional discovery is appropriate. THE COURT: MR. ROCK: Thank you. Mr. Rock. I have a brief.

Thank you, Your Honor.

It looks thick but that's only because I've got copies of the cases. motion. It's basically a five page response to that

And I guess what we're hearing is -- if I can

clarify this is the motion to strike or motion to not go forward, because we haven't really discussed whether or not any discovery or what discovery she's trying to or documents she's trying to prevent. MS. SIMPSON: MR. ROCK: All discovery just to clarify. Well, first of all, Your Honor,

Okay.

let me try to refresh your recollection when we were here back on March 31st and I presented to you a copy of the transcript and to opposing counsel's office probably a week or ten days ago. These arguments were made. And if just to

look at this one case which I believe is the -- 41 or 42, the Parker case. MS. SIMPSON: MR. ROCK: 42. I'm just going to briefly point

Okay.

out the differences between this case and -- the case at bar

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and the Parker case. If you look at the bottom of page two,

after determining that the petitioner's action will be treated as a motion under Rule 1.540(b), the Fourth District revisited this court's explanation of the substantive distinctions between intrinsic and extrinsic fraud or intrinsic and extrinsic in DeClaire versus Yohanan. I did not bring this motion under 1.540. I

brought it purely pursuant to a statute that has no time bar on it except the sale. 702.07 is the dispositive statute.

It doesn't say anything about in accordance with the Rules of Civil Procedure and before a sale. sale. It just says before a

And when the statute is -- when you look at a statute

can you look at the statute and give the statute meaning without looking at the Rule of Procedure? Absolutely. It

doesn't have anything to do with the Rule of Procedure. There are two cases and they're both cited in my -- I attached it and counsel I think has -- actually argued or she has cited Sterling Factors. MS. SIMPSON: I can give you the number so you can It's No. 45.

look that up, Your Honor. MR. ROCK:

Sterling Factors is a case where the

court said we follow Taylor, which was a Supreme Court case, and they're both actually in the -- attached to mine and certainly the Sterling Factors case is here, where it said, you know, when you're dealing with foreclosures and

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statute? MR. ROCK: Prior to sale. That's it. And there equitable actions we're -- the Supreme Court is even suggesting in Taylor that if you can show fraud it's not necessarily going to be limited. ask for relief after the sale. In other words, you could If a sale takes place and

it's still a void judgment or an invalid judgment there is no time bar on it, and that was Northcutt and Villanti in the concurring opinion on Sterling Factors. I believe Judge

Altenbernd -- or Justice Altenbernd wrote the opinion for the court. So what counsel is again arguing, like it argued back in March, and I don't know if it was -MS. SIMPSON: MR. ROCK: It was a different attorney.

I thought it was a different attorney This is

who argued the same thing that we're hearing today. a 1.540 motion. It's outside of a year.

Well, I would

agree that if I brought it under 1.540(b) it would be barred. However, the statute which creates the form for And even the Sterling Factors and

relief is prior to sale.

the Taylor case suggest that for certain types of fraud on the court you can, in fact, bring that even after sale, but suffice it to say that I am within the time -- clearly within the time specified in the statute. THE COURT: What is the time specified in the

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has -- and that would be in -MS. SIMPSON: MR. ROCK: Statutes. Tab 35.

-- 35.

Very, very -- you know, like a

four sentence statute.

The circuit courts and the judges

thereof shall have jurisdiction, power and authority to rescind, vacate and set aside a decree of a foreclosure of a mortgaged property at any time before the sale thereof has actually been made. Now, one could argue, well, if it was a sale and I made this objection within the ten days has there been a sale completed. We don't even have to go that far. There hasn't even been the So counsel is trying to We're

not saying a valid sale.

ministerial thing of an auction.

categorize all the fraud as intrinsic. When I go back to the motion that was filed, and, again, I do appreciate counsel providing the Court this, if you look at paragraph -- is it Tab 29 or -MS. SIMPSON: MR. ROCK: 29.

Tab 29, page eighteen of twenty-one,

Your Honor, paragraph two. THE COURT: MR. ROCK: What section? I'm sorry. Section six, paragraph two,

which would be page eighteen, bottom of page eighteen, Arabic Numberal II. The Defendants were in a process of a

loan modification based on the wife's poor health and sudden

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loss of income. They had submitted their payments. In

other words, my clients made post petition payments to the servicer, which was Wilshire, before, during and after the Plaintiff filed its foreclose action. That's one of the

reasons why they were not fighting the foreclosure, because they were told by the servicer you don't need to hire a lawyer, we're going to work this out, we're going to give you a loan modification. And then I cite this Chaties versus US Bank, NA, as trustee, which the court found that the plaintiff homeowner stated a cause of action for promissory estoppel where the plaintiff decided to forgo a Chapter 13 to her detriment due to the trustee's representation and justifiable reliance that they were going to get a loan modification. THE COURT: So they were dealing directly with the

person who could make that decision? MR. ROCK: THE COURT: Yes, Your Honor. Well, if you're a servicing agent,

what authority do they have to do a mortgage modification? MR. ROCK: Well, that explains why they didn't

act, because they're the ones that collect their payments. They tell you where to make them and when to make them. THE COURT: But they have no authority to make

modification agreements.

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purpose? MR. ROCK: Your Honor, I wouldn't disagree with

you, but that's their -- the servicer is the agent for the Plaintiff, and the Plaintiff's agent misled them. THE COURT: But the Plaintiff's agent for what

It's limited to collect the payments and remit

them to the lender. MR. ROCK: Well, that's true. They also tell you

how much more you have to pay or how much less you have to pay when there is escrow issues on taxes and insurance. THE COURT: Do you have any affidavit from the

servicing agent that they told these people that? MR. ROCK: No. But I have affidavits from both

clients that they -- and they are with part of the original motion. So, again, for us to say we're going to shoot you

down because you can't even hear it, I'm not -- in other words, the argument is if it is outside of the 1.540 one year period you are dead, and that is a legal decision that you have to make. That's why counsel and I discussed that it would sure be cleaner if you were going to shoot us down without the evidentiary hearing because you feel that there is a one year limit and 1.540 applies and is going to be superimposed on 702.07. I have found absolutely no cases and have

actually made this argument in other circuit court cases where the court said, well, if it's not limited it's prior

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six? MR. ROCK: THE COURT: Well, fundamentally -Which one would be considered to sale so it's a good motion. merits. Now let's talk about the

We're not here to talk about the merits today.

We're just here to talk about is the rug pulled out from me to make the motion under 702.07 if it is outside the year of the judgment. THE COURT: Well, based on Plaintiff's argument

then do you have any fraud that was extrinsic? MR. ROCK: Well, Your Honor, I think what you have

to do is you have to look at the fraud that we alleged that we are going to show. THE COURT: You listed how many issues of fraud,

extrinsic, i.e., it's not intrinsic, which one was -- had an opportunity to be brought before the court. MR. ROCK: Well, number one, counsel stated that

the assignment was received by the court prior to the judgment. In point of fact, Your Honor, that's not true.

The notice of assignment was presented to the court, Judge Mills, with the entry of the order of the final judgment. It was not filed with the court prior to that. In honesty,

in all candor and respect to Judge Mills, he didn't either review it carefully or it was not to where he looked at it and said, gee, isn't this interesting, it's a week after the

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otherwise. MR. ROCK: But when you submit admissible evidence case was filed, when in point of fact that's their only basis to claim to be before the court was the assignment of mortgage. The assignment of mortgage postdated the filing

by over a week. THE COURT: to the Plaintiff? MS. SIMPSON: THE COURT: Yes, sir, on the back of page four. And the mortgage follows the note, and But wasn't the note endorsed in blank

they recorded an assignment of mortgage to protect the lender. MR. ROCK: That would be true if, in fact, they

were in possession of the note at the time the action was commenced. However, they also filed a count to reestablish So they did not have possession But be that as it

a lost or destroyed note.

of the note when the action was filed. may -THE COURT: on its four corners. MR. ROCK: THE COURT: Yes, Your Honor.

But the complaint is deemed to be true

Unless you go to court to object to it

that defeats your own -- your exhibits defeat your own allegations the exhibits control. perhaps that the Plaintiff -For example, and I'm sure

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filed. THE COURT: MR. ROCK: Okay. And there is no -- in this particular signed. MR. ROCK: Correct, eight days after the case was THE COURT: MR. ROCK: THE COURT: What was the exhibit that -The assignment which is attached to -The assignment says the mortgage was

case there was no relation back or relation back with a previous effective date, which might make it arguable that it preexisted -- the assignment preexisted the filing. THE COURT: subsequently found? MS. SIMPSON: Yes, and it was submitted to the Let me ask a question. Was the note

court at summary judgment, the notice endorsed in blank. THE COURT: So they alleged in their complaint

that they were the holder of the note and mortgage. MR. ROCK: They said that they were owner and the They also alleged at the same

holder of the mortgage. time -THE COURT:

You say there is a distinction between

what you said and I said? MR. ROCK: THE COURT: MR. ROCK: Yes, Your Honor. They're the owner or the holder. The owner --

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holder. THE COURT: MR. ROCK: procedure says. THE COURT: MR. ROCK: Right. So they said they had it. But their evidence I think that falls within the rules. That's exactly what the rule of THE COURT: MR. ROCK: -- or the holder. They claim to be both the owner and the

That's correct.

that they submitted at the summary final judgment hearing disputed that on their own allegation. THE COURT: MR. ROCK: How did it dispute it? Because it showed their interest in the

mortgage came up a week after they filed the case. THE COURT: of the note? MR. ROCK: THE COURT: MR. ROCK: It's not dated. Okay. So -But what is the date on the assignment

The instrument -- the assignment would

control, because the assignment that's attached to the motion, Exhibit A, it says I hereby assign the note and the mortgage. Your Honor, if you look in my thing, the pile

that I just gave you -THE COURT: MR. ROCK: Okay. -- Exhibit A. That's it. And it says

I hereby assign the note and mortgage, and it's post filing.

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note. note. THE COURT: I'm trying to find out why that is a

problem, because if they alleged that they owned the note and mortgage and they had the note -- the purpose of doing the assignment of mortgage is for to protect the lender. They don't have to -- you don't have to assign the mortgage. You own the mortgage. If you have the note and -- the

mortgage follows the note. MR. ROCK: But, Your Honor, they didn't have the

That's why they had a count for lost or destroyed They subsequently secured it. THE COURT: I don't want to argue their case, but

a lot of these cases they always add in the alternative lost note because they can't find it at the time they file it. Did they not file a copy of the note with the complaint? MR. ROCK: I don't believe they did, Your Honor. There was no copy of the note filed

MS. SIMPSON:

with the complaint; but, Your Honor, this is all going -these are all going to issues that were already before the court at trial. MR. ROCK: THE COURT: Well, and, Your Honor, that's why -So these are all what she would refer

to as intrinsic issues. MR. ROCK: I agree if that rule -- which we're not

here under 1.540, and as I indicated the Parker case -THE COURT: Well, you're arguing you're not. She

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argues -MR. ROCK: THE COURT: MR. ROCK: That's correct. -- that we should be. Correct. Well, she says that this rule

of procedure is out there for all cases regardless of -correct me if I'm wrong, Counsel -- this would apply whether the statute says and in conjunction with Rule 1.540 and etc. The statute is clear that it does not have any such limitation and that -THE COURT: interpreted it? MR. ROCK: Because they agreed -- they argue that I did not bring this It does, but what about Parker which

they brought their case under 1.540. under 1.540.

I had no intention of bringing it under 1.540.

I brought it exclusively under the statute. THE COURT: Well, help me out here because I

thought I understood from Plaintiff's counsel that Parker v Parker was such that there was an explanation of 1.540(b) and the statute -MR. ROCK: THE COURT: Your Honor --- and why one would be looked at or One was established

the other and that's how they did it. in 1927.

The rule was established somewhat later. MR. ROCK: Your Honor, unfortunately you're the

one that has this, as I call it, a case of first impression

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where you're going to say by court decree this court interprets that when that rule which is -- should be used to assist the court should now supersede a statute. That

statute -- and I pointed out in my argument, Your Honor, that when rules conflict with statutes, statutes supersede, and that case is the -THE COURT: MR. ROCK: That's in what you gave me? Yes, Your Honor, that's the -- not the I want to say -- just a second, Your

Sterling Factors case. Honor. MS. SIMPSON:

While you're looking I won't

interrupt, but I do want an opportunity to rebut that particular point. MR. ROCK: Let's see. Just a moment. Amazon

versus State, which is 5 So.3rd 798. exhibit it is. I'm sorry.

I'm just not sure what It's

They labeled it Exhibit D.

Exhibit D, Your Honor, where -- and here they're talking about an administrative rule being deemed -- the rules serve the statutes, not the statutes serve the rules. And I believe it's on page five of six. On the

top of page five it says, which is in -- Page 801 of the official reporting, but on the top of page five it says to the extent that the State relies on an administrative rule to enlarge the wildlife officer's authority beyond that granted by the statute we would reject such a broad

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interpretation of the rule. It is axiomatic that an

administrative rule cannot enlarge, modify or contravene the provisions of a statute. So what counsel is saying -- suggesting is that the rule by some sort of a judicial fiat somehow completely circumvented a rule which the court -- the Supreme Court obviously knew what it was talking about, the statute, in Taylor versus Day, which is found at 102 Florida 1006. It's

Exhibit C in the attachments, Your Honor, where the court looked at 702.07 and said, you know, this type of relief can even be brought, believe it or not, post sale, but I didn't argue that because we're not post sale. So if the Supreme Court says that this type of statute can be raised post sale then how much more should I be permitted to argue the same statute pre-sale. I think

that I would submit that we have actually two forms of fraud and misrepresentation to present to the court, both intrinsic and extrinsic. THE COURT: MR. ROCK: Which one is extrinsic? Where they were prevented from

participating because of the representations made to them by the servicer. THE COURT: able to participate? How were they -- how were they not That was a decision they made based on

representations you said, but I mean not only that they

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weren't otherwise -MR. ROCK: Your Honor, that was the sufficient

misrepresentation to be recognized by other courts to allow people to be estopped from asserting that we're coming in here like a bulldozer and we're going to take away your house when we've been trying -- when you've been cooperating with us and submitting us HAMP application after HAMP application and we're giving you a modification, we're giving you a modification, and then there is a judgment. And that's what we suggest their affidavits say and that's what they will testify to. But I'm saying that you -- this Court should not make a determination at this point in time -- however it may be doing us both some sort of a time-saving maneuver if you say they didn't file it within a year, I'm ruling that 1.540 rules in addition to 702.07, and then we know exactly what the Court has to decide on. THE COURT: Well, let me ask you a question. I'm

assuming your client was not represented at the time of the motion for summary judgment. judgment. MR. ROCK: THE COURT: Correct. Could they not have come to the And if they They got notice of summary

hearing and -- did they come to the hearing?

did, did they say wait a minute, the servicing agent is

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telling us that we're working on a mortgage modification agreement and we don't understand why this is going forward. MR. ROCK: Stranger things have happened in

modification requests and servicers, Your Honor, and I think you hit the nail on the head without even having them to testify; but what they've already testified to in their affidavits, this is the exact conduct that the servicer was engaged in, and that's why they didn't participate until they realized something isn't right, and that's when I got involved. And fortunately we're not post sale because then this would really be a tough decision if it was post sale, because then I would have to argue the Taylor case and the Sterling Factors case to say it could even be post sale and you could bring this motion under 702.07. And I realize

this is a very peculiar statute dealing with mortgage foreclosures. Maybe we have a very peculiar state that we

live in that gives such broad protection for homeowners and their homestead property, and this is their homestead property. It's not a stretch, but it is there. THE COURT: MS. SIMPSON: You said you wanted to respond? Yes, briefly as to Sterling Factors.

And counsel did represent it correctly that Sterling Factors did hold that 702.07 did not bar a motion for fraud post sale. It should be noted that the Sterling Factors case was

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within one year of judgment. we're still pre-one year. issue. So the question then becomes how to read the rule and the statute together. And I would like to draw Your So, yes, we're post sale but

It doesn't really address that

Honor's attention to the Canon of Constitutional Avoidance. You may or may not be familiar, but I'll just bring you briefly to page eight of my motion, which is Tab 26, and then we'll look at the constitution and we'll look at a case that lays this out. But on page eight of my motion I cited to a United States Supreme Court case which I didn't bring but I just cited to it here in case Your Honor wants to review it at a later time to become more familiar with the Canon of Constitutional Avoidance. But that canon basically says

that the court must interpret statutes so that it does not conflict with the Constitution wherever possible. So let's now go look at Tab No. 46. Tab No. 46 is

Hanzelik versus Grottoli -- and, Madam Court Reporter, I'll give you my copy of this binder afterwards so you can have all of this -- it's out of the Fourth District in 1997. we're going to turn to page three here. And

This case addresses

what happens if you don't follow the Canon of Constitutional Avoidance. It's the second paragraph on the left side about Under Article V, Section 2

half way through that paragraph.

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of the Florida Constitution the Legislature is not permitted to set forth any enactment which would govern procedure in the courts of this state. Next paragraph, matters of practice and procedure in state courts are solely the province of the Supreme Court, Article V, Section 2, Florida Constitution. Powers

constitutionally bestowed on the courts may not be exercised by the Legislature, Article II, Section 3 of the Florida Constitution. Thus it's been held that a statute which

purports to create or modify procedural rule of the court is constitutionally infirm. Now we certainly don't want to have to ask this court to rule that Florida Statute 702.07 is unconstitutional, but under the Canon of Constitutional Avoidance we don't have to do that so long as those two, the statute and the constitutional provision, can be read together in such a way that neither -- the statute is not rendered unconstitutional. Skip down to the last full paragraph on the left side of the page. A rule of procedure prescribes the method

or order by which a party enforces substantive rights or obtains redress for their invasion. those rights. Substantive law creates

Practice and procedure are the machinery of And

the judicial process as opposed to the product thereof. the next paragraph again reiterates that rights are

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substantive. Timing is procedural.

Now I want to go back to the constitutional provisions which are under Tab No. 33. I will point out

under Article V, Section 2(a), the Supreme Court shall adopt rules for the practice and procedure in all courts. Right

above that, Article II, Section 3, no person belonging to one branch shall exercise any powers appertaining to either of the other branches. So we're going to have to interpret

this statute in such a way that it's not unconstitutional. We don't want to find 702.07 unconstitutional if we can possibly avoid having to do that. And I believe Parker

allows us to read the two cases in such a way that they don't -- avoid us having to do that. Back on page -- or Tab No. 42, I won't read again the things that I've read before, but on pages three and four, the right column on page three and the left column on page four, get to the holding that the Supreme Court has sliced and diced extrinsic fraud and intrinsic fraud, so that under the statute -- and if you just keep a finger there I'm going to scroll back to the statute under Tab 35 -- the statute allows the court to retain jurisdiction in a mortgage foreclose case as to fraud at any time prior to the sale. So, yes, Court, you have jurisdiction for fraud at any time prior to the sale, but that's not the end of it

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because they have to be read such that the statute is not unconstitutional, such as the statute is not creating a procedural rule. The procedural rule says, okay, the

Supreme Court has jurisdiction at any time prior to the sale, but what kind of fraud. Extrinsic fraud has to be brought -- or intrinsic fraud has to be brought under 1.540(b) within one year. Extrinsic fraud can still be brought at any time outside that one year. There is nothing that says extrinsic fraud They still have jurisdiction.

can't be brought unto 702.07.

But the rule as to timing of when that motion must be filed if it is intrinsic fraud, that is being alleged is 1.540(b). And I'm going to close with the top of page four on the left side. Again, the holding by the Florida Supreme

Court as recently as 2007, thus where fraud is extrinsic it's deemed independent of the action and, therefore, must be attacked independent of the action. However, where fraud

is intrinsic it is deemed to have occurred in the current action and must be attacked by a Rule 1.540(b) motion. That does not conflict with the statute saying that the court still has jurisdiction. It just says if

you're going to go intrinsic fraud, which on page three was not available until this rule was enacted at all, if you're going to go intrinsic fraud that's got to be under the rule. And I'll close with that, Your Honor.

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THE COURT: MR. ROCK: THE COURT: MR. ROCK: Thank you. May I briefly respond? Certainly. Your Honor, there is an affidavit that

I would ask this Court to consider, and that's the affidavit of Michael Gort that's been filed with the Court. I believe

a notice of filing indicates that essentially speaking and again for the record he talks about the securitized trust and how this claim of ownership of it is likely fraudulent. So I would ask the Court to consider -- I can't change the fact that this motion wasn't made within a year of the judgment. I'm also suggesting that when -- what

courts look at when you're talking about sale of a person's property, that person's property is their property and it isn't a final disposition of that property until the sale. So to that extent I would say that in mortgage foreclosure cases the Legislature has indicated that it ain't over until it's over and the sale makes it over and this is within a year of the sale that hasn't even taken place. And then -- so, you know, maybe the fact that a summary judgment appears to be interlocutory because it hasn't -- there has been no sale, I'm not -- I don't have cases to suggest that one way or the other. All I know is

that this is the type of a bifurcated proceeding -- a mortgage foreclosure envisions conduct up until the time of

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the -- of the decision. Then you have where all things can

go be discovered or go crazy between the point of the judgment and the sale, which creates a second window of opportunity. And I'm sure when the Legislature even back in 1927 knew what they were doing there would be situations where it would not be appropriate or we're going to make a special exception for this. And counsel has no case law

that says that this statute is now abrogated by this rule of procedure, and I understand that's the position she has to take. She has to say, well, when this rule of procedure was created it automatically statutorily changed the statute. Now the statute has to be read prior to sale and

within one year of the final judgment, and that's not what the statute says, and I'm suggesting that's what the Legislature needs to create or to correct in order -- if this is an unfair procedure to plaintiffs, then the Legislature can and should fix it, not the courts where it's going to, you know -- to me we're talking about this judicial construction is when you have -- I'll call it things of equal dignity, and the rule of procedure does not have equal dignity of the statute. The statute if it says what it says you can't trump it with a rule of procedure even though it's by the

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or -MR. ROCK: THE COURT: It was never asked for. They said -otherwise? MR. ROCK: THE COURT: No. Okay. Question. When your clients Supreme Court, and that statute seems to create a special category or a special situation when you're dealing with sale of property. You know, maybe that's because common law

and we have such special rights out of England where property is dealt with separately. We're not talking about a personal property right. We're talking about a right in real estate, a right in a person's homestead, where this is -- you can fight for your property and prove what you can prove before a sale. And

that's what I'm suggesting that we have in this particular case, and there is no case in Florida that construes that statute the way counsel is requesting this Court to construe it, and I don't have anything else. THE COURT: Is there any case that construes it

allegedly spoke with the servicing agent and said they were going to do a mortgage modification agreement, did they have a mortgage payment amount that was given to them? MR. ROCK: THE COURT: I think it was $1,400. Was that money ever escrowed or paid

Did they escrow it aside so that money

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ahead. MR. ROCK: Your Honor, it's contained in my would be available at this time? MR. ROCK: I think they were doing that for a

while and then it came that they had to hire a lawyer because nothing was coming. awhile. THE COURT: All right. Let's take a 15 minute I know they did that for

recess and we'll come back and finish. MR. ROCK: Thank you, Your Honor.

(Whereupon, a break was had.) MR. ROCK: the record? THE COURT: We're back on the record. Go right Your Honor, may I put something else on

client's affidavits that pursuant to the servicer's request they were to make payments and they did make payments, first to Wilshire and then to Bank of America. America sent about $6,000 back so -THE COURT: MR. ROCK: THE COURT: MR. ROCK: Did that represent all that they paid? Pardon me. Did that represent all that they paid? No. No. It was about probably So, you know, And Bank of

40 percent of what they had paid post filing.

just -- and their affidavits have the whole breakdown and have all the copies of the checks attached and everything.

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out. MR. ROCK: THE COURT: ask you a question. Right. We do -- we're still talking. So perhaps Your Honor, you know, needed to hear that. THE COURT: MR. ROCK: I appreciate that. Thank you.

And secondly, Your Honor, if in fact --

counsel and I had spoken if you are going to do an evidentiary hearing then we would like -- we've talked and we would like the opportunity to mediate. rush to come back with evidence. MS. SIMPSON: We may end up being able to work it So we're not in a

Well, before I make a ruling let me Does the bank want to mediate? The bank if today's motion is -- my If

MS. SIMPSON:

motion is denied we would definitely agree to mediate.

my motion is granted, I am not going to contest a mediation but I don't want a mediation instead of a ruling on this motion. THE COURT: That's fine. I understand. Okay. So

there is a possibility of mediation. MS. SIMPSON: client is a bank. with money. As I was telling counsel earlier, my

They're really good at knowing what to do They

They have no idea what to do with houses.

still haven't figured that out.

So if they can work out an

agreement on the loan to where the borrowers are able to make, you know, acceptable payments and they can work that

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out my bank would certainly much rather have, you know, acceptable payments than have a house. THE COURT: I've said that many times. The bank

doesn't want the house and the homeowners want to keep the house. MS. SIMPSON: THE COURT: Right. So if you all can get together that's It's a lot easier than

a win-win situation for everybody. coming to court. MS. SIMPSON:

And counsel has mentioned to me that

their financial situation may be such now that that might be a viable option where it may or may not have been before. don't know. I can't -What would be a viable option? A modification of the loan based on I

THE COURT: MS. SIMPSON:

their present financial circumstances. THE COURT: than it was before. MS. SIMPSON: That's what I interpret, but I don't Which from what I hear seems better

want to put words in his mouth. THE COURT: MR. ROCK: to the servicer. I understand. We submitted another HAMP application

I believe that we now have a third

servicer involved, so I'm not even sure if counsel is aware of that.

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sorry. MS. SIMPSON: For the record as to what you're THE COURT: repossession. MR. ROCK: It would be a sale. The next legal move that my client I guess the next move then would be a

MS. SIMPSON:

would make is -- if we're not able to successfully come to some type of modification of the loan, then the next legal step for my client would be to take the house to sale, but then certainly again we'd rather -- if it's at all possible they'd rather modify it than end up with a house that they don't know what to do with. THE COURT: I understand. All right. I want to

first compliment both counsel for the preparation and oral arguments, and this Court is not insensitive to the economic situation. '27. We may be very similar to what it was in 1926,

But based on the oral arguments I do find that there I read the Rule 1.540(b) in

was no extrinsic evidence.

conjunction with Statute 702 and find that there is a modification. They explain it very well in Snyder v Snyder.

Therefore I'll grant your motion. MR. ROCK: THE COURT: You mean Parker versus Parker? Correct. Parker versus Parker. I'm

granting, my motion was for a protective order to strike the notice of production. That is granted?

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THE COURT: MS. SIMPSON: Yes, ma'am. To strike the notice of hearing,

which counsel has essentially withdrawn, that the order is there will be no hearing on that motion? THE COURT: MS. SIMPSON: That's correct. To strike the answer and affirmative

defenses that were filed post-judgment? THE COURT: post-judgment. MS. SIMPSON: motion in its entirety. THE COURT: MS. SIMPSON: That is correct. We have also requested in our Yes, sir. And to deny Defendant's Correct. Made more than one year

wherefore clause, but I'm not going to get into that today, I just want to point out for the record that we did request fees and costs for having to come and take care of this motion. THE COURT: to go forward on that. MS. SIMPSON: Yes, sir. We'd rather just mediate I'll reserve on that if you're going

and deal with this later. THE COURT: I would also like to say part of my

ruling is based on the fact what I would say as a former tax attorney is we used to call the facts and circumstances test, what a reasonable person would do in the same or

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order. MS. SIMPSON: MR. ROCK: The mediation? correct? MS. SIMPSON: Correct. But we won't set and have similar circumstances, and I think it would be such that somebody would show up at a hearing and say I don't understand this, you know, I'm getting two -- mixed messages. And, of course, the bank is the one who makes the So if you want to do a proposed order and

final decision.

send it to Mr. Rock and then get it to me we'll go from there. Anything else for the record? MS. SIMPSON: Yes, sir. And I'll put into this

order too that mediation is ordered as well. THE COURT: I think that would be appropriate.

Mr. Rock, you don't have any objection? MR. ROCK: No. No objection, Your Honor. Prior to sale. But we don't have a sale date,

MS. SIMPSON: THE COURT:

a sale date until we get to mediation. THE COURT: Can we put a date certain in there? I

always like to have a time when we go to mediation set. MR. ROCK: I'd like it within 20 days of the

Yes. As long as we can coordinate that

MS. SIMPSON:

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quickly. You know, I'm certainly willing to coordinate it

as quickly -THE COURT: Well, I have a suggestion. Perhaps

you two can get your office on the phone and find dates available and set a mediation date. to see it within 30 days from today. MR. ROCK: So would I, Your Honor. Let's get together tomorrow. We'll I would certainly like

MS. SIMPSON:

set a mediation date and then we'll draft the order and we'll just put that date right in there. MR. ROCK: Perfect. Sound good?

MS. SIMPSON: MR. ROCK: THE COURT:

Very good. Thank you very much. Appreciate it.

(Whereupon, the hearing was concluded at 3:10 p.m.) * * *

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_______________________________ SHARON RUBY STATE OF FLORIDA COUNTY OF PINELLAS I, SHARON K. RUBY, Court Reporter of Parliamentary Reporting, Inc. and Notary Public in and for the State of Florida at Large, DO HEREBY CERTIFY that the foregoing hearing was taken before me at the time and place therein; that I reported said hearing stenographically, and that this transcript of said hearing, pages 1 through 47 inclusive, constitutes a true and correct transcription of the shorthand report of said hearing. I FURTHER CERTIFY that I am neither related to, nor employed by any counsel or party to the cause pending, nor interested in the event thereof. IN WITNESS WHEREOF, I have hereunto affixed my hand and official seal this 20th day of June, 2011.

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